Reorganisations in France: how to select the best tool
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Alexandra Stocki
Alexandra Stocki is partner in Proskauer Rose’s labour and employment law department

It may seem odd, but there is no legal definition of “reorganisation” in the French labor code. However, this notion is referred to on several occasions, and it even constitutes one of the components of the definition of dismissal on economic grounds (Article L.1233-3 of the labor code cites among the grounds of dismissal on economic grounds “a reorganisation that is necessary to preserve the competitiveness of the company”).

According to the Larousse dictionary, to reorganise is “to organise again or to organise on new bases”. Thus, the notion is very broad, and it can refer to any evolution in the organisations within the company, whether or not it involves a reduction of staff.

Where to start?

The following points must absolutely be checked before considering the best tool for a reorganisation:

  • The number of employees: the threshold of 50 employees is one of the conditions for the application of the PSE (social plan) rules. A company that does not regularly employ 50 employees and is contemplating the dismissal of more than nine employees on economic grounds is not concerned by the rules applicable to PSEs: it will have to follow the procedure defined by the labor code (consultation of employee representative bodies (IRPs), proposal regarding support measures), but it is not obligated to obtain a decision from the labor administration regarding the project.
  • The ERs’ situation: were the elections organised, and if not, is there a certificate taking note of the absence of IRPs (procès-verbal de carence)? The date of expiration of the term of office of the CSE members should then be checked, as well as the date for the next elections: the reorganisation projects that we are discussing will involve, directly or indirectly, a consultation of the CSE. It is essential to check the end of the terms of office in order not to be confronted with the need to conduct elections during the information and consultation process, and potentially with a change of employee representatives. If that should happen, it would not be required from a legal standpoint to recommence the consultation process. It is obvious, however, from a practical standpoint, that a change of representatives would complicate the conduct of the consultation process and could potentially lead the employer to extend the duration of that process if a request were made.
  • The existence of representative trade unions in the company and the validity of the appointment of trade union delegates: this question mainly concerns the employment safeguard plan (plan de sauvegarde de l’emploi or PSE). This is because a PSE may be elaborated in two ways: unilaterally, or in a negotiated way, through an agreement signed by one or more representative trade unions having obtained at least 50% of votes cast in favour of representative trade unions in the first round of the last elections of CSE members, regardless of the number of voters. There is a major advantage to the negotiated route: the control by the Labor Administration is limited in that case (the Labor Administration does not verify, in particular, the adequacy of the plan in proportion to the company’s or group’s means). It is, therefore, necessary to verify whether it is possible to enter into an agreement, with whom it can be entered into (who must sign to be able to reach the 50% requirement), and whether the trade union delegates were duly appointed since the last elections because the Labor Administration will check whether the agreement was duly entered into.
  • Reorganisation precedents: it is essential to identify any support measures that may have been proposed in the past in the context of similar projects. It should be expected that these precedents will be considered as a basis for negotiation, a starting point, by the employee representatives. To avoid a systematic increase in demands, it is fundamental to gauge the measures presented within the framework of the new project appropriately and to prepare arguments to explain the differences.
  • Was the consultation on strategic orientations properly conducted? Certain courts have barred employers from continuing the negotiating process on a PSE if the consultation on strategic orientations was not properly conducted: the employer is then forced to resume and conclude the consultation on strategic orientations before it can resume the consultation on the PSE. Although this position is open to criticism from a legal standpoint and is not shared by all courts, it constitutes an important precedent to keep in mind.

Selecting the proper tool

Various reorganisation tools exist: the employment safeguard plan (plan de sauvegarde de l’emploi or PSE), the collective mutually agreed employment termination (rupture conventionnelle collective or RCC); the collective performance agreement (accord de performance collective or APC); the autonomous voluntary departure plan (plan de départ volontaire autonome or PDVA); and forward-looking workforce and skills management (gestion prévisionnelle des emplois et des compétences or GPEC).

These tools are different in terms of timing and objectives to be met. In my opinion, the first question to ask oneself concerns the social impact of the project: does my project involve the elimination of positions?

If the answer is “yes”, the collective performance agreement is not a tool that can be used. Article L. 2254-1 of the labor code, which defines what is possible in the context of an APC, does not provide for the abolition of positions. An APC may adjust the working time, the work organisation, and the allocation of working hours; it may modify the employee’s compensation; and finally, it may address internal professional or geographical mobility within the company, but it may not enable the abolition of positions.

If the project involves the abolition of positions, the PSE, the PDVA, the RCC, or the GPEC agreement (if an agreement was signed) can be considered.

A second question is whether the abolitions of positions are precisely identified and whether they are unavoidable. This question is often closely related to the issue of the timing of the project: do I have the absolute need to carry out the abolitions of positions within a certain timeframe?

If the project necessarily involves the abolition of precisely identified positions within a certain timeframe and it will clearly be impossible to preserve certain positions, then, in that case, the RCC, the PDVA, and even the GPEC are not the proper tools.

The RCC is based on voluntary acceptance by the employees. The stated objective of the ordonnance no. 2017-1387, which introduced the RCC, was to define a self-standing legal framework for reorganisation that is separate from the PSE and based on voluntary acceptance. Within the framework of the RCC, the abolitions of positions can thus be achieved only through voluntary departures and Article L.1237-19 of the labor code specifies that the RCC agreement must exclude “any dismissal to achieve the objectives assigned to it in terms of job cuts”.

The PDVA, which is the product of the practice for many years and is not provided for by the code, also implies that the positions will not be abolished in the absence of volunteers.

The GPEC, which is a tool for the anticipation of changes concerning employment and skills in the medium term, does not in principle enable a company to meet a need to abolish precisely identified positions within the organisation.

The last question to ask oneself is the following: is my project motivated by actual short-term economic difficulties?

This question is fundamental. The law regarding dismissals on economic grounds was built to address this situation. Legally, even in the presence of economic difficulties, there is nothing that would prevent opting for the RCC instead of the PSE. This was indeed confirmed recently by the Administrative Appeals Court of Versailles in a decision of 14 March 2019. However, it may be more difficult, in the presence of economic difficulties, to negotiate an RCC or an APC, because the employee representatives could consider that in doing so, the company is attempting to bypass the application of the rules on dismissals on economic grounds. It is, therefore, necessary to explain why the contemplated project does not mandatorily entail the use of a PSE.

Practical recommendations

  • Ensure the proper persons are involved in the project. This is always a difficult issue in practice. The proper persons must be involved, while their number must be limited to limit possible leaks. Even though the persons in question will sign a non-disclosure agreement, this does not constitute absolute protection against the risk of leaks. It is also necessary to ensure clear governance of the project team, with a coordinator and clear rules for decision-making. Concerning consultants and lawyers, it is important that they be involved in the project as early as possible for the sake of efficiency.
  • Determine the persons who will be talking to the ERs and trade unions, and provide support to those individuals. Conducting discussions on a PSE project, for example, is a trying experience, psychologically and physically. It is necessary to pay close attention to psychosocial risks for HR teams in particular. These teams are often forgotten, in my opinion, even though they are on the frontline working under great strain.
  • It is then naturally necessary to provide in advance for contingency plans in case of a strike or the blocking of worksites.
  • Finally, it is necessary, depending on the scale of the project, to identify the key players within the administration, at the political level, and prepare a specific plan of action and communication: labor administration, Ministry of the economy and labor, local elected officials.